Edmunson Electrical Distribution (www.edmunson-electrical.co.uk(Links to an external site.)Links to an external site.) is aleading distributor of electrical equipment and components withover 230 branches in the United Kingdom. The company is awholesaler of electrical products acting as an intermediary betweenmanufacturers and customers. Accounts are classified according toturnover and margins achieved. The ‘bread and butter’ of thebusiness is the electrical contractor, who provides high turnoverbut low margins. The more significant the purchases, the higher arethe rebates and discounts awarded to these customers. A secondimportant group of customers are hotels, hospitals, and otherinstitutional customers who provide less volume but better margins.It is company policy to maximize the turnover of each customer sothat Edmunson can, in turn, command a better price from themanufacturers. With such a wide range of product lines and items,the company cannot afford to stock every product so their owncompetence is measured not only in price but also by the service,especially delivery reliability.
The company uses a SPI (standard practice of initiation) to givesimilar accounting procedures for stocks, invoicing, ledger entryand so on. Branches in all other respects compete in terms oforders, charges, and revenues, which are the sole responsibility ofthe branch manager. Each branch is a separate profit center andoperates more like a franchise since the capital is given directlyto the branch, although 19 percent of annual profits go to theparent company. The branches compete, but the sales representativesfeel that the syste3m is fair and motivating. The manager isusually supported in each branch by an accountant and at least onerepresentative as well as buyers, telesales, and store personneland van drivers.
Branch A is one of the most successful in the group. There areseveral major accounts but relatively few electrical contractorsand competition is now well represented in the area. Turnover ishigher and costs are lower than in many other areas. The branchmanager is well respected and higher successful, the youngest inthe group, and last year steered his branch to a $3 millionturnover with a profit share between the eight employees of$160,000. This success, combined with the hunger to created by theprofit share, has produced a highly motivated team. This teamspirit is encouraged by the manager with open offices and an easycommunication style. People are allocated to tasks according totheir suitability – one salesperson actively seeking new accounts,another servicing existing accounts. All staff are aware of the 19percent profit levy so they aim to beat this on all businessnegotiated. However, because their figures are based on previousyear’s targets, in some months sales are held back if the increasewas too great, in the knowledge this will raise next year’s figure.Salespeople have been sent on training courses, but do qualitativetargets are set for them.
Branch B is currently in financial trouble and operates in starkcontrast to Branch A. In the past two years turnover fell by almostone-half, a stock deficit was recorded and, since 19 percent ofprofit was to be paid, no profit sharing to staff was achieved.Competition is fierce in this area, with 30 other wholesalersoperating, but no involvement of salespeople in setting targets isallowed. For example, a new recruit with two weeks’ experience wasgiven the task of opening 40 new accounts in 12 months. He failedand left the company. No sales forecast is set and people areencouraged to get business wherever they can. The result is thatseveral people left and, after two years of disastrous results, themanager was asked to resign.
From the information given, suggest what factors contributed tothe diverse performances of the two branches.
What training programs would you develop to help their salesoperations?
